Commission on the loan application - correct settlement

Service-Tax

Using banking services (such as running a bank account or obtaining a loan) is an integral part of running a business. In most cases, banking services are offered against payment. The taxpayer should always assess whether the fees incurred are related to the conducted activity and consider how these expenses should be accounted for. It happens that the entrepreneur is charged a commission on the loan application. Find out how it should be properly accounted for!

Tax deductible - what can be included?

The commission on the loan application, paid for by a natural person running a business, should be considered as an expense pursuant to Art. 22 sec. 1 of the Personal Income Tax Act. According to this act, in order for this fee to be considered a tax deductible cost, it must meet the following conditions:

  • be incurred in order to obtain income or secure or to preserve its source,

  • it cannot be an expense under Art. 23 of the above Act.

Commission on the working capital loan application - as to be included in the KPiR

The decision on recognizing the commission on the loan application in the tax ledger will depend on the allocation of funds that the taxpayer will have at his disposal for the loan taken - and this aspect should be considered in the first place. In art. 23 of the PIT Act, there is no provision for exclusion from the cost of commission for a loan application. Therefore, if the funds are allocated for purposes related to the company's day-to-day operations (working capital loan), and additionally the taxpayer has evidence to prove it, the expense may be recognized in tax deductible costs on the date it is incurred.

For taxpayers who settle their accounts on the basis of the KPiR, as a rule, the date of incurring costs is the date of issuing an invoice, bill or other evidence constituting the basis for booking the cost (Article 22 (6b) of the PIT Act). In the case of bank charges, such document will be a bank statement. The commission for considering the loan, the funds of which are to be allocated to current expenses, should be entered in column 13 of the KPiR - “Other expenses”.

Recognition of the commission on the application in the case of a loan for investment purposes

As already mentioned, the purpose for which the entrepreneur will allocate the funds received from the bank is of great importance. The PIT Act (Article 23 (1) (33)) contains a regulation according to which interest, commissions and exchange rate differences on loans (credits) increasing the investment costs during the implementation of these investments cannot be counted as tax deductible costs. According to this article, if the loan was taken out for investment purposes, the commission for considering the application may be included in the costs only after the completion of the investment. In this case, the expense will increase the value of the fixed asset and will be accounted for as depreciation write-offs from the initial value of the fixed asset.